Report: Joe Paterno, leaders had ties

Updated: December 6, 2011, 2:32 AM ET
ESPN.com news services

Former Penn State head football coach Joe Paterno had business ties with board members of The Second Mile, the charity founded by alleged child molester and former Penn State assistant coach Jerry Sandusky, The Daily is reporting.

The Daily reported Monday that Paterno and three fellow investors, including longtime Second Mile board chairman Robert Poole, secured financing to build a $125 million luxury retirement community around 2002, according to public records.

The publication also reported that Paterno was partnered with the same team of investors in developing a golf resort and nearby restaurant and inn. Paterno also joined with other current and former Second Mile board members on a bottled water company, a coaching website and a chain of convenience stores.

Pinnacle Development, one-half of the developer team that built The Village at Penn State, included Paterno, Poole, William Schreyer -- a Penn State trustee whose daughter is a longtime board member of The Second Mile -- and local developer Philip Sieg.

Each partner stood to make an estimated $590,000 in fees and 15 percent annual interest on a $125,000 initial investment if the project was successful enough to get funding for a second phase, according to The Daily. The retirement community was built in State College, which has a non-student population of about 42,000, near the university.

But the project did not flourish and the Village's nonprofit owner filed for bankruptcy on Wednesday. The filing indicated that Pinnacle was never repaid its initial investment, and that $18.8 million was owed to residents who moved out and demanded refunds on their entrance fees.

Paterno could not comment because he is "undergoing chemo and radiation every day" for lung cancer, his wife, Sue, told The Daily. Paterno's attorney, Wick Sollers, declined comment when contacted by The Associated Press.

Sandusky, who founded The Second Mile in 1977, is accused of assaulting eight boys over 15 years. He maintains he is innocent and told his charity's board in 2008 he was being investigated. The charity says it subsequently barred him from activities involving children.

A lottery has been established for public seating for Sandusky's next court hearing on the charges.

The Centre County Court of Common Pleas said Monday that applications for seating at the Dec. 13 preliminary hearing would be accepted for 24 hours on the county's webpage starting Wednesday at noon ET. A random drawing will then be held to assign seats. Those who get seats will be notified on Friday.

A court statement said space was limited for the hearing but did not specify how much public seating was available.

The 84-year-old Paterno, major college football's winningest coach, was fired in the turbulent aftermath of Sandusky's arrest as many questioned why Penn State officials didn't do more to stop alleged abuse, including an accusation that Paterno forwarded to his boss, athletic director Tim Curley, in 2002.

As the retirement community project struggled to rent its apartments and cottages -- with entrance fees approaching $500,000 -- Paterno appeared in a 2005 ad promoting the hillside complex with a view of the football stadium as a place he could see himself retiring.

Penn State President Graham Spanier, who also was fired after a grand jury report detailing the allegations against Sandusky was released last month, conceived the project in 1995.

Since the project was being built on Penn State property, a nonprofit was created to act as its owner and operator. Former Second Mile board member Peter Weiler was its president; Penn State's former senior vice president for finance and business, Gary Schultz, was its treasurer. Both men declined to comment.

The Village at Penn State did not live up to its anticipated success. Occupancy was lower than expected, and two years ago, officials admitted they could not pay off the bond holders -- which public documents indicate needed to happen in order for Pinnacle to get its developer fee.

The Village's executive director, Marianne Hogg, said Pinnacle has not been involved in the project since she started around 2007. Village tax forms indicate the developer team was paid $2.3 million prior to construction in 2000, but Hogg declined to say whether that was part of $4.7 million the developers expected to make as the project moved into its second phase.

Ed Lauth, a local businessman who is close friends with both Paterno and Poole, owned Aqua Penn, the bottled water company that Paterno invested in and helped build.

He said Paterno was more motivated by bettering the community than reaping profits from his business ventures. Two months after Aqua Penn sold for $112 million to a French company in 1998, Paterno reportedly donated $3.5 million to Penn State.

Asked for comment on The Daily story, The Second Mile released a statement saying, "The Second Mile will continue to adhere to its legal responsibilities throughout this process. As always, our thoughts and prayers are with the victims and their families."

Information from The Associated Press was used in this report.